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Summary

  • Dividend Aristocrat stocks are stocks that have increased dividends for at least 25 consecutive years.
  • Using an updated metric and weighting system, I have ranked the Dividend Aristocrats.
  • This article reviews the 10 scoring Dividend Aristocrat stocks that make up the Light Heavyweight class.

Overview

In April/May, I wrote a series of articles that ranked the Dividend Champions, based on a variety of metrics. Part 1 of that article can be found here. Using an updated metrics and weighting system (based on several great comments and questions from readers of that series of articles), this series of articles will focus on ranking the Dividend Aristocrats.

The updates in the metric/weighting system were explained in detail in Part 1 of this series that focused on the top nine scoring Aristocrat stocks that make up the Heavyweight class.

Score And Weighting System

In ranking the Dividend Aristocrats, the following 15 metrics were used:

 Scores 0-15
# of Years With Consecutive Dividend Increases 
Current Dividend Yield 
Dividend Growth (past ten years) 
PE Ratio (trailing twelve months) 
PE Ratio (forward) 
Return on Assets (trailing twelve months) 
Return on Equity (trailing twelve months) 
10-Year Price Returns 
Revenue Growth (past ten years) 
Earnings Growth (past ten years) 
Return on Invested Capital (trailing twelve months) 
Payout Ratio (trailing twelve months) 
EPS Estimates for Current and Next 4 Quarters 
Price-to-Free Cash Flow (trailing twelve months) 
Debt-to-Equity Ratio (Annual) 

The next step was to apply a weight to certain metrics I feel more or less important than others. Because I consider myself a dividend growth investor, the metrics with the highest weights are Earnings Growth (1.6x), Dividend Growth (1.5x), Dividend Yield (1.5x), Revenue Growth (1.4x), EPS Estimates for Current and Next 4 Quarters (1.3x), Return on Invested Capital (1.2x), Forward PE Ratio (1.1x), and # of Years With Consecutive Dividend Increases (0.9x). All remaining metrics are weighted to their original values.

After completing the analysis, the values assigned to individual stocks ranged from 198.40 to 97.90.

Note: Because of the high number of stocks being evaluated, I relied on data provided by YCharts, rather than calculating my own ratios/values for each metric. Also, due to the fairly recent spin-off related to Abbott Laboratories (NYSE:ABT) and AbbVie (NYSE:ABBV), I have decided to not include these stocks in the rankings, since a large portion of the metrics used look at historical data.

This article, Part 2, will focus on the next highest scoring set of stocks, the Light Heavyweights, which include:

  • Sherwin-Williams (NYSE:SHW) - Total score of 162.7
  • PPG Industries (NYSE:PPG) - Total score of 162.3
  • Lowe's (NYSE:LOW) - Total score of 162.1
  • McDonald's (NYSE:MCD) - Total score of 161.5
  • Genuine Parts (NYSE:GPC) - Total score of 160.4
  • Family Dollar (NYSE:FDO) - Total score of 156.9
  • AT&T (NYSE:T) - Total score of 156.3
  • Wal-Mart (NYSE:WMT) - Total score of 156.2
  • Sigma Aldrich (NASDAQ:SIAL) - Total score of 155.6
  • ExxonMobil (NYSE:XOM) - Total score of 155

Sherwin-Williams

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3643.6
Current Dividend Yield1.08%23
Dividend Growth223.50%812
PE Ratio (trailing)27.97x55
PE Ratio (forward)24.34x77.7
Return on Assets11.72%1212
Return on Equity43.16%1515
10-Year Price Returns405.70%1515
Revenue Growth81.39%811.2
Earnings Growth189.40%1320.8
Return on Invested Capital21.20%1416.8
Payout Ratio27.71%1212
EPS Estimates for Current and Next 4 Quarters14.71%1215.6
Price-to-Free Cash Flow22.46x1111
Debt-to-Equity Ratio0.97x2

2

Sherwin-Williams has a strong history of dividend and earnings growth, as well as, impressive returns on equity and invested capital. The company does have higher debt and a lower dividend yield than many Aristocrats.

PPG Industries

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4376.3
Current Dividend Yield1.31%23
Dividend Growth48.89%11.5
PE Ratio (trailing)13.94x1414
PE Ratio (forward)21.54x1011
Return on Assets12.85%1313
Return on Equity40.11%1515
10-Year Price Returns232.30%1010
Revenue Growth69.86%811.2
Earnings Growth345.60%1524
Return on Invested Capital21.90%1416.8
Payout Ratio20.93%1313
EPS Estimates for Current and Next 4 Quarters7.09%56.5
Price-to-Free Cash Flow19.63x1212
Debt-to-Equity Ratio0.69x5

5

PPG has seen impressive stock price returns along with strong revenue and earnings growth. While the company has increased dividends for 43 consecutive years, the growth over the past ten years has been less than 50%, one of the lowest values out of all the Dividend Aristocrats.

Lowe's

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases52119.9
Current Dividend Yield2%57.5
Dividend Growth1.05K%1522.5
PE Ratio (trailing)20.41x1111
PE Ratio (forward)17.70x1213.2
Return on Assets7%99
Return on Equity19.02%1212
10-Year Price Returns72.68%33
Revenue Growth58.48%79.8
Earnings Growth79.51%812.8
Return on Invested Capital10.65%67.2
Payout Ratio31.27%1111
EPS Estimates for Current and Next 4 Quarters18.54%1418.2
Price-to-Free Cash Flow15.11x1212
Debt-to-Equity Ratio0.89x3

3

Unlike PPG, Lowe's dividend history has been very impressive. Combined with its estimated EPS growth, Lowe's is poised to continue providing nice returns for shareholders.

McDonald's

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3843.6
Current Dividend Yield3.18%913.5
Dividend Growth47.27%11.5
PE Ratio (trailing)18.5x1212
PE Ratio (forward)17.69x1213.2
Return on Assets15.58%1515
Return on Equity35.51%1515
10-Year Price Returns278.90%1212
Revenue Growth55.05%79.8
Earnings Growth293.70%1422.4
Return on Invested Capital18.98%1214.4
Payout Ratio56.95%66
EPS Estimates for Current and Next 4 Quarters9.25%79.1
Price-to-Free Cash Flow22.29x1111
Debt-to-Equity Ratio0.88x3

3

McDonald's has the second highest yield out of this group of 10 stocks, but its dividend has been slow growing. It has seen a slow down of revenue growth, but the company has been able to continue showing impressive earnings growth and returns on assets, equity, and invested capital.

Genuine Parts

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases581412.6
Current Dividend Yield2.63%710.5
Dividend Growth91.67%34.5
PE Ratio (trailing)19.44x1212
PE Ratio (forward)19.10x1213.2
Return on Assets9.04%1111
Return on Equity21.77%1313
10-Year Price Returns122.40%55
Revenue Growth65.39%811.2
Earnings Growth109.30%1016
Return on Invested Capital17.11%1113.2
Payout Ratio47.61%88
EPS Estimates for Current and Next 4 Quarters6.96%45.2
Price-to-Free Cash Flow15.62x1212
Debt-to-Equity Ratio0.23x13

13

Genuine Parts has a solid balance sheet and fairly attractive price. The company continues to see consistent and significant growth in both its dividend and earnings.

Family Dollar

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3843.6
Current Dividend Yield1.80%46
Dividend Growth264.70%1015
PE Ratio (trailing)16.51x1313
PE Ratio (forward)15.52x1314.3
Return on Assets10.19%1212
Return on Equity25.49%1414
10-Year Price Returns115.50%55
Revenue Growth94.86%912.6
Earnings Growth122.50%1117.6
Return on Invested Capital17.53%1214.4
Payout Ratio30.43%1111
EPS Estimates for Current and Next 4 Quarters11.36%911.7
Price-to-Free Cash Flow103.63x11
Debt-to-Equity Ratio0.32x11

11

Family Dollar has seen impressive dividend growth. With low debt and a low payout ratio, the company's financials are stable. The company operates in a very competitive industry but has been able to maintain positive growth across both revenues and earnings.

AT&T

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3021.8
Current Dividend Yield5.19%1522.5
Dividend Growth47.20%11.5
PE Ratio (trailing)10.29x1414
PE Ratio (forward)13.41x1415.4
Return on Assets6.59%88
Return on Equity20.61%1313
10-Year Price Returns43.90%22
Revenue Growth222.00%1419.6
Earnings Growth117.40%1016
Return on Invested Capital19.77%1315.6
Payout Ratio52.70%77
EPS Estimates for Current and Next 4 Quarters5.55%33.9
Price-to-Free Cash Flow14.48x1313
Debt-to-Equity Ratio0.82x3

3

AT&T has the highest yield out of this group of stocks and the 2nd highest yield out of all Aristocrats. The company has basically become an income investment. Its yield remains attractive, but its future dividend growth and revenue/earnings growth are likely to be slow moving.

Wal-Mart

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4165.4
Current Dividend Yield2.54%710.5
Dividend Growth269.20%1015
PE Ratio (trailing)15.62x1313
PE Ratio (forward)14.64x1415.4
Return on Assets7.76%99
Return on Equity21.71%1313
10-Year Price Returns40.23%22
Revenue Growth74.12%811.2
Earnings Growth120.40%1117.6
Return on Invested Capital11.94%78.4
Payout Ratio43.50%99
EPS Estimates for Current and Next 4 Quarters11.34%911.7
Price-to-Free Cash Flow20.62x1111
Debt-to-Equity Ratio0.70x4

4

Wal-Mart has seen nice growth in earnings, revenue, and its dividend over the past 10 years. It has an attractive yield and a payout ratio that will support future growth.

Sigma Aldrich

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3843.6
Current Dividend Yield0.91%11.5
Dividend Growth170.60%69
PE Ratio (trailing)24.82x77
PE Ratio (forward)23.25x88.8
Return on Assets13.25%1414
Return on Equity17.88%1111
10-Year Price Returns250.60%1111
Revenue Growth100.90%1014
Earnings Growth167.10%1219.2
Return on Invested Capital15.70%1012
Payout Ratio21.01%1313
EPS Estimates for Current and Next 4 Quarters7.07%56.5
Price-to-Free Cash Flow22.10x1111
Debt-to-Equity Ratio0.13x14

14

Sigma Aldrich has a strong balance sheet with low debt and a low payout ratio; however, it also has a low dividend yield. The company has seen impressive price returns as well as solid returns on assets and equity.

ExxonMobil

 ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3221.8
Current Dividend Yield2.66%710.5
Dividend Growth155.60%69
PE Ratio (trailing)14.12x1414
PE Ratio (forward)13.28x1415.4
Return on Assets9.31%1111
Return on Equity18.88%1212
10-Year Price Returns132.10%66
Revenue Growth65.28%811.2
Earnings Growth124%1117.6
Return on Invested Capital16.39%1113.2
Payout Ratio35.12%1010
EPS Estimates for Current and Next 4 Quarters0.11%11.3
Price-to-Free Cash Flow35.19x88
Debt-to-Equity Ratio0.13x14

14

ExxonMobil has a solid dividend yield and growth, along with low debt and payout ratio. The company has averaged double digit yearly growth in earnings and is attractively priced.

Conclusion

These articles, just like any other investment screen, ranking, or rating system, should be the first step in a long line of analysis to determine whether or not a stock is the right choice for you. Another step for individual investors might be to use the metrics I have included, but change the weight of them based on important factors to see how that affects overall scores.

I do feel that each of the stocks listed in this article is worth consideration as a long-term buy, but the stocks I personally like best are Lowe's, AT&T, McDonalds, and ExxonMobil. As always, I suggest individual investors perform their own research before making any investment decisions.

Part 3 of this article will feature the "Middleweight" Dividend Aristocrat stocks (11 stocks that have weighted scores between 154.1 and 140.3).

Source: Dividend Aristocrats Ranking: Part 2, The Light Heavyweights